The Brazilian tax reform introduces significant changes that directly impact foreign investors and entrepreneurs operating or planning to operate in the country, especially in import and export sectors.

With Brazil’s historically complex tax system, the proposed simplification aims to attract international investment and enhance the competitiveness of Brazilian companies in the global market.

Professionals like Roberta (administrative director at a foreign manufacturing company), Eduardo (foreign trade manager), Camila (CFO of an international holding), and Leonardo (business owner under the Lucro Real tax regime) all share concerns about how these reforms will affect their business operations.

In this article, we clearly explain the main changes introduced by Brazil’s tax reform and how they impact foreign investment decisions. We highlight the key risks, new opportunities, and strategic adjustments needed to stay compliant and optimize the tax burden in Brazil.

Key Tax Changes Impacting Foreign Investors

 

The approved tax reform in Brazil introduces new taxes on goods and services IBS (Tax on Goods and Services) and CBS (Contribution on Goods and Services) to replace multiple existing taxes. It also brings changes to income taxation, including the return of tax on dividends and potential adjustments to corporate income tax rates.

Below, we break down each key change in detail:

Dividend Taxation and Corporate Income Tax (IRPJ) Changes

One of the most impactful changes for foreign investors is the introduction of dividend taxation. Since 1996, dividends distributed by Brazilian companies were exempt from income tax, which favored the repatriation of profits abroad. With the new tax reform, this scenario changes: dividends will now be subject to Withholding Income Tax (IRRF).

According to the bill under review, dividends paid to Brazilian residents exceeding R$50,000 per month will be subject to a 10% IRRF rate. For foreign investors, the 10% tax will apply to any amount of dividends sent abroad, regardless of value, and will be levied on beneficiaries (individuals or companies) residing outside Brazil.

In practice, this means that foreign shareholders receiving dividends from Brazilian companies will now have 10% of those amounts withheld as tax something that hasn’t existed in decades.

This change demands attention from professionals like Camila, CFO of an international holding, and Leonardo, a business owner under the Lucro Real regime, especially when planning profit distributions. For example, if a Brazilian subsidiary could previously distribute 100% of its post-tax profits (after IRPJ/CSLL) to foreign shareholders tax-free, it will now face a 10% withholding tax on the distributed amount.

To prevent excessive taxation, the government has implemented a cap on the combined tax burden for companies and shareholders. For non-financial companies, the total tax burden (corporate tax + dividend tax) should not exceed approximately 34%. In the case of Brazilian residents, there may even be a refund of excess tax paid.

The IRPJ (Corporate Income Tax) remains around 34% (25% IRPJ + 9% CSLL) for companies under the Lucro Real regime, but the addition of a dividend tax increases the total tax burden on distributed profits.

Foreign investors now face an increase from 0% to 10% in taxation when repatriating profits an important factor when deciding whether to reinvest profits in Brazil or send them abroad.

Practical Example: let’s say a foreign-owned company in Brazil earns R$1,000,000 in pre-tax profit. Assuming a total corporate tax rate of ~34%, it would pay around R$340,000 in IRPJ/CSLL, leaving R$660,000 in net profit.
Before the reform, the company could send the entire R$660,000 abroad as tax-free dividends. After the reform, a 10% withholding tax applies to this amount—R$66,000 will be withheld, and the foreign investor will receive R$594,000 net.

In this simplified scenario, the effective tax rate on total profit rises from 34% to approximately 40.6%. Though outcomes vary, this example highlights the importance of strategic planning in profit distribution under the new tax rules.

End of Interest on Net Equity (JCP): another major shift is the expected elimination of Juros sobre Capital Próprio (JCP), a commonly used mechanism for profit distribution in Brazil. JCP allowed companies to pay shareholders with tax-deductible interest, subject to 15% withholding tax, making it an efficient tool for tax planning.

With the tax reform, JCP may be significantly reduced or abolished, meaning that traditional (now taxable) dividends will become the primary form of shareholder remuneration. As a result, professionals like Camila and Leonardo will need to reassess their capital structure and profit distribution strategies.

In Summary Brazil’s corporate tax system is moving closer to international standards, where both the company and the shareholder are taxed. For foreign investors, this means a new layer of taxation to consider though double tax treaties may help reduce the impact.

While the IRPJ rate itself remains unchanged, authorities aim to keep the total tax burden (corporate tax + dividend tax) around 34% for standard companies, preserving Brazil’s competitiveness and avoiding disincentives to productive investment.

Unifying PIS/COFINS into CBS (Contribution on Goods and Services)

Another major structural change introduced by Brazil’s tax reform is the simplification of federal consumption taxes. Currently, foreign companies operating in Brazil must navigate PIS and COFINS—federal contributions levied on gross revenue, featuring complex rules (cumulative vs. non-cumulative regimes) and numerous exceptions. The reform replaces these taxes with the Contribution on Goods and Services (CBS), a single federal value-added tax.

PIS, COFINS, and the IPI (Tax on Industrialized Products) will be merged into the CBS, eliminating multiple tax bases and the excessive compliance burden that currently affects businesses.

CBS will operate under a non-cumulative model, allowing companies to claim credits on the tax paid during earlier stages of the production chain—much like a traditional VAT (Value-Added Tax). This helps avoid tax cascading and reduces the “tax residue” embedded in prices.

For foreign investors, this means Brazil’s tax system will become more aligned with international VAT systems: companies will pay CBS on sales but deduct the CBS paid on purchases (inputs, goods, services), ensuring taxation only on the value they actually add.

The combined standard rate for CBS and IBS (discussed below) is expected to be around 28% on goods and services. This rate will be finalized through future legislation, but it’s projected to reflect the current combined burden of PIS, COFINS, ICMS, and ISS.

The main advantage is simplified compliance. Roberta, an administrative director at a manufacturing firm, and Eduardo, a foreign trade manager, will now handle just one federal tax instead of three, streamlining reporting and reducing complexity.

Instead of calculating PIS and COFINS separately (each with different rates and bases), and managing IPI on products, companies will adopt a unified calculation method. CBS will also operate through a centralized federal system, reducing the need for multiple filings, reconciliations, and tax declarations.

For companies under the Lucro Real regime, like Leonardo’s, the change could simplify bookkeeping. Today, these companies already use a non-cumulative method for PIS/COFINS with tax credits. Under CBS, input credits will continue but under a more transparent and unified framework.

Foreign businesses currently eligible for Lucro Presumido, which applies a simplified tax model with cumulative PIS/COFINS at lower rates, will shift to the non-cumulative CBS model. This means that all companies—regardless of size—will now manage CBS credits, requiring updates to accounting systems and ERPs. The upside: no more embedded cascading taxes inflating costs.

In summary, the creation of CBS simplifies life for foreign investors in Brazil by reducing the complexity of complying with multiple overlapping federal contributions. According to analysts, unifying PIS and COFINS is a key step in improving Brazil’s business environment. With three federal taxes and 27 different ICMS laws across states, Brazil has long been seen as a tax maze. CBS is part of the solution—centralizing federal taxation on goods and services and making it more familiar and accessible to global investors.

Creation of the IBS (Tax on Goods and Services) and the End of ICMS/ISS

The other key pillar of Brazil’s tax reform on consumption is the introduction of the IBS (Imposto sobre Bens e Serviços, or Tax on Goods and Services), which will be managed at the state and municipal levels. The IBS will replace the current ICMS (state tax on goods and circulation) and ISS (municipal tax on services).

For foreign investors, this shift offers major relief from the complexities of navigating Brazil’s fragmented tax system. Currently, each of Brazil’s 27 states has its own ICMS rules, and over 5,000 municipalities impose distinct ISS regulations. This patchwork of tax laws creates legal uncertainty and high administrative costs for companies operating across the country.

With the implementation of the IBS, Brazil will adopt a nationally unified tax framework, governed by a Managing Committee composed of federal, state, and municipal representatives. The goal is to standardize the taxation of goods and services nationwide, improving legal predictability and reducing compliance burdens.

The IBS will serve as the subnational component of Brazil’s dual VAT system, functioning similarly to the federal CBS. Like CBS, IBS will be levied on value added, with credits allowed along the supply chain, helping to eliminate cascading taxes. ICMS, ISS, and even the IPI (Tax on Industrialized Products) will be absorbed into this new dual VAT structure (CBS + IBS).

The key difference lies in revenue allocation: while CBS funds the federal government, IBS revenues will be distributed to states and municipalities. However, for businesses, both taxes will be applied in a harmonized manner, sharing the same tax base and integrated collection systems. This helps eliminate double taxation and reduces tax-related disputes between states—a problem long known as the “fiscal war.” Additionally, taxation will shift to the destination of consumption, replacing the previous origin-based approach that incentivized tax incentives and loopholes.

In practice, a foreign investor owning a manufacturing company in Brazil like Roberta will no longer need to master dozens of ICMS laws across different states. The IBS will apply a uniform national rate, estimated at around 25%, which combined with CBS will total approximately 28%. Exceptions may exist for specific goods or services, but the overall framework will be far more predictable.

The IBS will be collected centrally by the national committee, which will then allocate funds to the appropriate states and municipalities. This removes the need for businesses to handle ICMS filings per state and ISS payments per municipality a significant reduction in red tape.

The reform will also introduce a Selective Tax (Imposto Seletivo or IS) also known as the “sin tax.” This tax will apply to products deemed harmful to health or the environment (e.g., tobacco, alcohol, pesticides), replacing the IPI in those cases. The IS has a regulatory function (discouraging consumption), and will not impact most routine import/export operations—only those involving specific taxed goods.

Overall, the IBS brings a more transparent, uniform tax environment to Brazil’s internal market. For foreign investors, this means fewer regional surprises and greater predictability in tax costs. Sectors such as e-commerce, logistics, and manufacturing that operate nationally will benefit the most from the reduction in complexity.

However, the transition period demands close attention. In the initial years, companies will need to navigate a dual system operating with both the current and new tax rules in parallel. By 2026, businesses will be required to adjust invoicing systems and display IBS and CBS on electronic invoices, preparing for full implementation.

Tax Reform Impacts on Import and Export Operations

 

Foreign investors are often engaged in international trade operations importing raw materials or equipment for their Brazilian subsidiaries, or exporting products from Brazil to other global markets.

Brazil’s tax reform introduces significant changes in both areas, aiming to preserve and enhance the competitiveness of Brazilian exports while also balancing the taxation of imports.

These updates are especially relevant for multinational companies seeking cost efficiency, compliance, and strategic planning in cross-border transactions.

Imports

When it comes to imports, the basic principle remains unchanged: goods and services entering Brazil will continue to be taxed. However, instead of multiple overlapping taxes, the new system introduces the IBS (Tax on Goods and Services) and CBS (Contribution on Goods and Services), which will replace several existing federal and state taxes. These will apply alongside the Import Duty (Imposto de Importação – II) and other potential customs fees.

The taxable base for IBS and CBS on imports will be the customs value of the goods, including import duties and other applicable fees similar to the current method where PIS/COFINS-Import and ICMS apply over the CIF value plus II and related costs. Crucially, the IBS/CBS rates on imported goods will match those applied to equivalent domestic products, ensuring fair competition and tax neutrality between foreign and local producers.

A major advantage for importers is that full tax credits will be available on IBS and CBS paid at customs, provided the company operates under the standard tax regime. For example, if a foreign company imports raw materials for use in local manufacturing, the IBS/CBS paid on those imports can be credited against future tax liabilities on domestic sales. This ensures non-cumulative taxation and prevents cascading tax costs, making Brazil’s system more efficient and globally aligned.

While current laws already allow some PIS/COFINS-Import and ICMS credits (especially for Real Profit companies), the unified CBS/IBS system promises a more streamlined and predictable process for recovering these credits.

Foreign investors should also note that imported services and intangible assets, such as software licenses and royalties, will be taxed similarly to tangible goods. Furthermore, in transactions involving non-taxpayers or digital cross-border platforms, foreign suppliers may be held jointly responsible for collecting and remitting IBS/CBS. For instance, if a digital service is sold by a foreign provider directly to a Brazilian consumer, that provider or the online platform may be required to register in Brazil’s CBS/IBS system and handle tax compliance.

This measure aims to close loopholes in digital economy taxation. Export managers like Eduardo will need to monitor which foreign suppliers or platforms are covered by these new obligations to ensure tax compliance and avoid penalties.

In summary, importing goods and services into Brazil will still generate taxes, but the IBS/CBS credit mechanism will help neutralize the cost for productive operations. Businesses must adapt to the new documentation requirements such as indicating IBS/CBS values on import declarations and inbound invoices especially during the transition phase.

Special economic zones like the Manaus Free Trade Zone will maintain their tax incentives, adapted to the new framework. For instance, IBS/CBS exemptions on imported inputs will remain available in these regions. As a result, foreign investors with industrial operations in the Western Amazon or other special regimes will not be negatively impacted, though they must align with the new system’s structure.

Exports

For export-focused foreign investors in Brazil, the new tax reform brings a major advantage: the clear reaffirmation that exports remain tax-exempt. Under the new rules, all exports of goods and services will be exempt from both CBS (Contribution on Goods and Services) and IBS (Tax on Goods and Services). This aligns with the long-standing principle that taxes should not be exported, ensuring that Brazilian products can compete internationally without embedded domestic tax costs.

More importantly, exporters will enjoy full credit on CBS and IBS paid on inputs, even when those inputs are used to produce goods for export. This prevents any residual tax burden from inflating export prices, a significant improvement for foreign-owned manufacturers like Roberta’s company, which targets global markets.

The reform also resolves past uncertainties related to export-related services. Previously, services such as international freight, storage, and export insurance could be subject to conflicting interpretations under ISS or PIS/COFINS. Now, these services are explicitly tax-exempt, eliminating grey areas and reducing operational costs along the export chain.

Another key improvement involves the Drawback system, which suspends taxes on inputs used in goods destined for export. The new legislation ensures that domestically sourced inputs receive the same favorable tax treatment as imported ones, leveling the playing field and encouraging local sourcing. With Brazil’s exports under drawback benefits already reaching US$67 billion in 2024, this reform could further increase usage especially among companies looking to optimize logistics and costs.

Trading companies (known as “tradings”) will also benefit from new rules that allow suspension of CBS/IBS on domestic purchases, provided the goods are exported within 180 days. This measure helps reduce the cost burden for small producers who export through tradings. To access this benefit, the trading must meet certain requirements such as authorized economic operator (AEO) certification, minimum net worth, and tax compliance. Once goods are exported, the suspension converts to a zero rate, avoiding cash flow constraints for the trading.

For export-driven foreign businesses, the reform offers a simpler tax system, fewer compliance burdens, and broader access to credits and incentives. However, one key operational consideration is managing the accumulation and recovery of tax credits. Companies exporting most of their production may accumulate large CBS/IBS credits, requiring proactive cash flow planning. The government has pledged to provide faster and more efficient refund mechanisms, but companies like Leonardo’s will need to track these processes carefully often with the help of tax advisors or specialized consultants.

How the Tax Reform Affects the Decision to Invest or Continue Investing in Brazil

 

From a foreign investor’s perspective, Brazil’s tax reform presents two sides that influence the country’s attractiveness as a destination for capital:

• Simplification and Legal Certainty (Positive):
As discussed, the unification of taxes and streamlining of the system tends to improve Brazil’s business environment. A simpler, more transparent, and standardized structure reduces compliance costs and the risk of errors or tax disputes. Currently, Brazil is known for the high number of hours spent annually on tax compliance and for legal uncertainty factors that drive foreign investors away. With the reform, these barriers are expected to decrease significantly. For example, instead of navigating a maze of ICMS rules or waiting years to recover PIS/Cofins credits, a foreign company will now face a system more aligned with global practices, making it easier to integrate Brazilian operations into their global structure. This reduction in bureaucracy and distortion makes Brazil more predictable and aligned with international standards an important advantage when deciding to invest or expand.

• Tax Burden on Profits (Challenge):
On the other hand, the introduction of a dividend tax adds a new fiscal cost on investment returns. Financial investors and multinational companies assess not only operational ease but also net returns. Previously, profits generated in Brazil could be fully distributed, but now there will be a 10% withholding. Some investors may revise their ROI (return on investment) projections to incorporate this reduction. In the short term, this may raise the question: “Is Brazil now less tax-efficient compared to other emerging markets?” The answer depends on the comparison: many countries tax dividends (often at rates higher than 10%), so Brazil’s alignment with this practice doesn’t necessarily make it less globally competitive rather, it ends a historical exception. Additionally, the 10% rate is moderate, and for corporate foreign investors, there may be tax credits in their home country or treaty-based treatment that avoids double taxation. For example, if the parent company is located in a country with a tax treaty with Brazil, the tax withheld here may be credited abroad, or the rate may even be capped (many treaties set limits of 10% or 15% on dividends). Thus, the net impact will vary case by case.

• Sectoral Neutrality and Competitiveness:
The reform aims to be neutral in terms of total tax burden that is, not significantly increasing total revenue, but redistributing and simplifying it. However, some sectors will inevitably gain or lose. Foreign investors need to assess how their specific sector will be affected. For instance, service-intensive companies (which previously paid 5% ISS and 9.25% cumulative PIS/Cofins without credit) may see their effective tax burden rise under a ~25% non-cumulative IBS/CBS system though they may offset it with input credits, many service companies have few inputs to credit. On the other hand, industries and commerce, which struggled with cascading ICMS or partial credit systems, may reduce costs through broader credit mechanisms under the new VAT model. Roberta should analyze her supply chain: if her industry had reduced ICMS rates in a given state, it may lose those incentives; however, she may benefit from no longer paying “hidden” taxes on raw materials. Leonardo might see his real-profit business maintain a similar tax load, while companies under the presumed profit regime (if he had opted for it) could face increases due to the end of simplified taxation. These factors influence decisions on whether to continue investing: companies already established in Brazil will recalculate margins; potential new investors will simulate tax scenarios under the new and old models.

• Transition and Short-Term Uncertainty:
It’s important to note that the reform will be implemented gradually, from 2026 to 2033. In the coming years, there will be a transition period where both the current and new systems will coexist (starting in 2027 with reduced CBS charges and in 2029 with IBS, while phasing out the old taxes). This transition phase may cause uncertainties and additional short-term costs: companies will need to adapt their systems, issue invoices reflecting both models (in 2026, for example, companies must indicate the “simulated” IBS/CBS values on invoices, even though not effectively paid), train staff, and possibly hire extra consulting services to ensure dual compliance. This initial effort is an investment to benefit from the definitive system, but it may discourage less patient investors. However, since the transition is designed to be gradual and subject to review (with evaluations every five years by Congress), it’s expected to allow for necessary adjustments over time. Canceling or reversing investment decisions due to the transitional phase would be a short-term view; experts recommend focusing on the medium and long term, in which Brazil will likely offer a more modern and efficient tax system.

In conclusion, this dual analysis shows that the reform brings Brazil closer to global practices and removes long-standing obstacles positively affecting its attractiveness while introducing some new fiscal costs that need to be managed. Rational foreign investors will incorporate these changes into their business models, adjusting strategies rather than abandoning the Brazilian market. After all, Brazil remains a large economy full of opportunities, and with a simpler and more transparent tax system, the so-called “Brazil Cost” is expected to decrease. As Bernard Appy (head of the tax reform) stated, the goal is to deliver a system that is “simpler, more balanced, and fairer” something that, if achieved, benefits all who produce and invest in the country.

Top Questions from Foreign Business Owners

 

With so many changes underway, it’s only natural for doubts to arise. Below are some of the most frequently asked questions from profiles like Roberta, Eduardo, Camila, and Leonardo, along with summarized explanations:

• Will the overall tax burden increase for my company?
It depends on the business profile. The reform is designed not to raise the average tax burden, but to redistribute it. Sectors with a short input chain (e.g., pure service providers) may face a higher effective tax rate, while industrial or export-oriented sectors may benefit from reduced cumulative taxes. At the profit level, there will indeed be an increase for those distributing dividends (an additional 10% on distributed profits). However, corporate income tax (IRPJ) is not increasing and could even slightly decrease in effective terms if the company fully utilizes the new IBS/CBS credits. Each company should simulate its own case: many will see a similar overall burden with the benefit of a simpler structure; others may need to adjust pricing or margins. For instance, Leonardo might not see a major shift in his factory’s overall tax burden (aside from the new dividend tax), while Camila should prepare her holding company to pay tax upon profit distribution.

• When do these changes take effect? Do I need to act immediately?
Implementation will be gradual. In 2026, a testing phase begins: companies must issue invoices indicating IBS/CBS values “in parallel,” but will not yet pay these new taxes. Starting in 2027, CBS will be charged at a reduced rate, and PIS/Cofins rates will start to drop. In 2029, IBS will begin to be charged (also at a reduced rate), while ICMS/ISS will begin to phase out. The full transition will last until 2032/2033, when the old taxes are fully eliminated. Therefore, there is no immediate tax increase 2024 and 2025 will still operate under current rules. However, it’s strongly recommended to start preparing now: update tax software to accommodate IBS/CBS, train finance and tax teams, and follow upcoming regulations and decrees. Being ready by 2026 for the testing phase will help avoid fines and operational issues when the new taxes become mandatory in 2027.

Read also: Importation models in Brazil: a quick guide

 

• What will happen to the tax incentives and special regimes I use (e.g., Free Trade Zone, Drawback, RECAP)?
Most current incentives will be preserved, with technical adjustments. For example, the Manaus Free Trade Zone (ZFM) will continue to offer tax exemptions on inputs and products, adapted to IBS/CBS. Drawback and suspension regimes for exports have been incorporated into the new system, allowing IBS/CBS suspension on export inputs, including those sourced locally. The Simples Nacional regime for small businesses will also continue, although a specific IBS/CBS model for Simples may be introduced later. The Interest on Equity (JCP) incentive is being phased out, impacting companies that used it for tax-efficient shareholder payments. If your business benefits from ICMS incentives (e.g., presumed credit programs) or fixed ISS rates, these are likely to be gradually eliminated, as the IBS is designed to avoid individual incentives but a transition phase with compensation funds for states may be implemented. Eduardo, who works in imports, should monitor how customs regimes will adapt: many are expected to continue (e.g., temporary admission, bonded warehouses, Repetro for oil and gas), but IBS/CBS obligations for these regimes will be clarified through future regulation. In short, no legitimate incentive will disappear overnight, but all will be “translated” into IBS/CBS terms. Consulting a tax advisor is advisable for a case-by-case assessment.

• My company is under the Actual Profit or Presumed Profit system; should I change regimes?
The reform primarily affects indirect taxes (on consumption), not direct taxation of profit. Therefore, choosing between Actual Profit and Presumed Profit still follows similar criteria (revenue, profit margins, etc.). Under Actual Profit, companies already calculate taxes based on actual profits and can use PIS/COFINS credits this remains similar under CBS, making the transition smoother. Under Presumed Profit, companies currently pay a lower PIS/COFINS rate without credit; under the new model, they will pay CBS with credit (non-cumulative), which may require reassessing whether Presumed Profit is still advantageous. In many cases, Presumed Profit may lose appeal for high-margin businesses, as they will lose the benefit of lower PIS/COFINS rates. However, the Presumed Profit regime will remain valid until at least 2032. There is no need for an immediate change; instead, simulate how your company’s numbers would look under each model and monitor developments. Leonardo, as an Actual Profit taxpayer, will likely stay where he is, just watching for adjustments in the IRPJ base and the elimination of JCP. Smaller foreign businesses currently using Presumed Profit may eventually switch to Actual Profit if it becomes more advantageous under the new tax logic this should be analyzed with a consultant on a case-by-case basis.

• Will Brazil become more or less attractive for foreign investment after the reform?
This is a broad question encompassing many of the points above. In summary: more attractive due to simplification, fairness, and predictability key factors for assessing country risk and compliance costs. Less attractive in the short term due to the new dividend tax and the end of some incentives, which may reduce net profits. Overall, economists expect the reform to boost Brazil’s economic growth in the medium term by eliminating distortions and increasing productivity. A growing economy with an improved business environment is likely to attract more capital, offsetting the occasional tax increase. Therefore, the prevailing view is positive but foreign investors should incorporate the new tax structure into their business plans to avoid surprises.

Risks and Opportunities for Import and Export Companies

With the outlined changes, we can highlight specific risks and opportunities for foreign companies operating in the import and export sectors:

Opportunities:

• Elimination of Cascading Taxes:
The introduction of the non-cumulative principle in IBS/CBS will eliminate the “hidden” taxes embedded in the so-called Custo Brasil (Brazil cost). This makes Brazilian products more competitive. Exporters will find it easier to price their goods without leftover tax burdens, allowing them to either lower prices abroad or increase profit margins. Importers reselling in the domestic market will also benefit, as they will be able to fully utilize the IBS/CBS tax credits from imports, reducing the final tax cost passed on to consumers.

• Operational Simplification:
Fewer different taxes mean fewer accessory obligations (such as declarations, payment slips, and distinct accounting records). This is expected to reduce the time and money spent on compliance. Foreign companies often cite bureaucracy as one of the main obstacles in Brazil—if this barrier is reduced, they can redirect efforts to core activities (sales, production). Moreover, the end of the state-level “fiscal war” brings stability: productive investments will no longer need to chase incentives in State A or B to be viable, as the IBS will be uniform. This facilitates planning for factories and distribution centers based on logistics, without tax distortions by location.

• Increased Export Competitiveness:
As noted, the reform offers clear benefits for Brazilian foreign trade: no taxes on exports of goods or services and improvements to regimes like drawback. Foreign companies based in Brazil can expand their export operations knowing that the country will continue supporting them. There is also the possibility of a social tax cashback (return of indirect taxes to low-income families), which should increase domestic consumption of certain goods—benefiting industries focused on the local market. While this cashback doesn’t directly affect importers/exporters, it reflects a commitment to sustaining economic activity without burdening exporters (since export credits are fully recoverable).

• International Alignment and Structured Investment:
Taxation on dividends combined with a total corporate tax burden of around 34% places Brazil in alignment with OECD Pillar Two, which establishes a global minimum tax of 15% on corporate profits. Large multinational corporations are watching global tax rules closely; by taxing foreign dividends at 10% and maintaining ~34% domestic taxation, Brazil virtually guarantees that no parent company will need to pay a top-up tax in its home country. This removes a key uncertainty for investors from countries adopting the Global Minimum Tax—investing in Brazil won’t trigger tax penalties abroad, as Brazil already meets the minimum. Additionally, the simplified dual VAT model brings Brazil closer to practices seen in Mercosur and other trade partners, potentially facilitating future trade agreements, which would benefit exporting companies.

Risks:

• Adaptation and Transition Costs:
In the short and medium term, companies will face costs to adapt: new systems, training, possible consulting services, and a likely dual-tax system until 2033. This demands investment in both time and resources. There is a risk of compliance errors during the transition (e.g., issuing invoices without properly highlighting the test-phase IBS in 2026 and facing penalties, or missing tax credits due to unfamiliarity with new rules). Organizational learning will be key to mitigating this risk.

• Pending Regulations and Residual Complexity:
While the reform framework is set, much will depend on supplementary laws and regulations. Complementary Law 214/2025 has already been enacted, setting guidelines, but finer points (such as exact tax rates, the list of exceptions under the Selective Tax, operations of the IBS managing committee, and transition rules for PIS/COFINS credits into CBS, etc.) are still to be defined in the coming months and years. This temporary legislative uncertainty can concern investors: until everything is finalized, there is a regulatory risk that certain rules may differ from expectations. Still, the core structure (non-cumulative dual VAT) is unlikely to change. Another concern is that, despite simplification, Brazil may retain some particularities (e.g., regional special regimes, exceptions for certain sectors like the Free Trade Zone, tax deferrals for agribusiness), maintaining a certain level of complexity. It won’t be a tax utopia overnight—residual complexity must be managed.

• Sector Reactions and Potential Litigation:
Some sectors may feel harmed and turn to the courts to preserve previous benefits or challenge parts of the reform. Foreign companies could face a period of tax litigation, creating uncertainty. For example, if the services sector seeks to reduce the proposed 28% rate or if states dispute the IBS revenue-sharing formula, we may witness legal battles. Foreign investors should monitor these developments but avoid direct involvement—the expectation is that most disputes will be resolved politically. Nonetheless, until the dust settles, there is a legal risk in Brazil’s tax environment, even though the reform aims to reduce litigation in the long term.

• Potential Tax Burden Increases in Some Cases:
Despite the reform’s overall neutrality, some operations may experience an effective increase in tax burden. For example, importing services currently involves ISS (2% to 5%) and PIS/COFINS (9.25% non-cumulative, with credits). Under the new system, it could be subject to IBS+CBS at a non-cumulative rate of ~25%. If the company has no taxable sales (such as a service center providing support to its foreign headquarters), it might not be able to use the tax credits, turning that 25% into a cost. Another example: companies under the presumed profit regime that previously distributed high volumes of tax-free dividends will now face a 10% reduction. Small exporters who previously couldn’t recover ICMS credits may see limited new benefits but must still comply with new obligations. In summary, there will be winners and losers. The risk for foreign investors is discovering that their specific niche was disadvantaged. This is why tax due diligence focused on the reform is crucial to identifying such risks and planning mitigation strategies (e.g., operational restructuring or changing the business model, if applicable).

Considering all these factors, Camila, the CFO, should develop financial scenarios that incorporate the new tax effects, while Roberta and Eduardo need to map how their supply and distribution chains will be impacted. Leonardo should monitor cash flow management and any potential accumulated tax credits. In all cases, the key is anticipation and planning—not reactive responses after changes occur.

Strategies for Adaptation and Efficient Tax Planning

 

In light of Brazil’s tax reform, foreign import/export companies must adopt proactive strategies to adapt and optimize their outcomes. Here are some recommended actions:

1. Closely Monitor Regulation and the Implementation Timeline
Stay up to date with complementary laws, decrees, and regulations that will further define the reform. Participate in seminars, webinars, and consultancies on the topic. Understanding when each change takes effect (e.g., dividend taxation potentially applying to 2025 profits; IBS/CBS trials in 2026; full implementation in 2027) enables more precise planning. Camila, for example, needs to know whether dividend taxation will apply to distributions from year X, as this affects the decision to anticipate payments. Eduardo should monitor any possible changes in import tariffs or trade regimes while the reform doesn’t directly address import duties, related adjustments may occur.

2. Review Capital Structure and Dividend Policy
With dividend taxation on the horizon, reassess your profit distribution and reinvestment policies. Foreign companies might consider reinvesting more of their profits in Brazil since withdrawing funds becomes slightly costlier if local growth opportunities are attractive. On the other hand, if your company holds retained earnings from previous years, it may be worth distributing them before the new law takes effect to benefit from the current exemption, provided it makes financial and strategic sense. Any adjustments should be balanced: avoid rushing decisions just to dodge taxes and instead integrate the tax factor into optimal capital allocation. Also revisit the debt vs. equity financing mix: with the end of interest on equity (JCP), intercompany loans or third-party capital might become more attractive. Still, be cautious of excessive debt due to thin capitalization rules.

3. Update Compliance Systems and Processes
Invest in updating billing software, ERP, and accounting systems to handle IBS and CBS calculations and reporting. Starting in 2026, invoices must reflect both the old and new tax regimes. Your systems must be ready to manage both and submit accurate reports. Plan internal testing before 2026 and ensure your product tax codes (CFOP/NCM/CST) are correctly mapped to IBS/CBS rules. Train your accounting and tax teams on the new rules how to claim IBS/CBS credits, required supporting documents, and upcoming digital tax reporting formats (SPED). Internal pricing processes also need adjustments: if your prices previously included a certain tax percentage, that format will now change. Tax and IT departments should work hand in hand. Consider conducting a “gap analysis” with consultants to identify obsolete procedures and what needs to be implemented. Get ahead before it becomes mandatory.

Read also: Tax transformations and new accounting standards in Brazil

 

4. Run Simulations and Perform Tax Planning
Use 2024-2025 to simulate the reform’s impact on future years. Compare your current vs. projected tax burden under the new system: what would your indirect and direct taxes look like if the new system were already in place? Identify areas of increase or savings. Then develop optimization strategies: for instance, if a certain input will no longer generate significant IBS credits (perhaps due to a reduced rate), renegotiate its cost. If a finished product will be more heavily taxed, consider modifying the supply chain manufacturing in another state may no longer offer fiscal advantages, so focus on logistics efficiency instead. Legal tax planning will shift focus from tax war to value chain efficiency. Another critical simulation: determine whether your parent company will be able to offset Brazilian dividend taxes in the home country. This will inform capital repatriation decisions.

5. Maximize Tax Credits and Incentives
Under the new system, any input used for core business activities generates tax credits including expenses like services, energy, and rent, which were often restricted under the current model. Organize your accounting to capture every eligible IBS/CBS credit. Review supplier contracts it may be more advantageous to acquire certain services in Brazil (to generate local credits) than abroad, if feasible. For imports, explore customs regimes: with IBS/CBS, systems like bonded warehouses, temporary admission, and drawback become even more important to postpone or avoid unnecessary tax payments (e.g., if you plan to re-export, use suspension to avoid paying taxes upfront and having to request refunds later). Eduardo should revisit the logistics chain: consolidate shipments through a certified AEO trading partner for tax suspension, and take advantage of new reform mechanisms to cut operational costs. Roberta should assess regional incentives: if deciding between investing in a factory in Manaus (Free Trade Zone) or elsewhere, knowing that the ZFM maintains its benefits while the rest of the country unifies tax rules may influence the choice.

6. Monitor Market Dynamics and Economic Indicators
As aspects of the reform take effect, monitor key metrics: credit recovery times, competitors’ price adjustments, and shifts in consumer behavior due to tax pass-throughs. These insights allow for tactical adjustments. For instance, if local competitors lower export prices due to tax savings, you may need to adjust your pricing to maintain international market share. Similarly, if certain service costs increase, renegotiate long-term supplier contracts. Remember, this reform doesn’t happen in isolation combine this monitoring with other ongoing changes (like administrative reforms, business simplification efforts, or exchange rate fluctuations) for a comprehensive view of your operations in Brazil.

7. Rely on Local Tax and Accounting Experts
With so many changes underway, professional support is critical. Brazilian tax law even after reform requires specialized oversight to avoid errors and seize tax-saving opportunities. Many foreign investors already outsource accounting and tax functions in Brazil to experts so they can focus on their core business. This strategy is even more relevant now having a dedicated team well-versed in IBS, CBS, Corporate Income Tax (IRPJ), and international standards will accelerate adaptation. Local professionals can also advocate on your behalf during technical discussions (e.g., commenting on draft laws or engaging with trade associations involved in regulatory negotiations). Camila, as CFO, could hire a consultancy to develop a 2025–2030 tax plan for the holding company, anticipating reform impacts and aligning them with strategic goals.

In Summary, the key word is planning. Companies that prepare and adapt early are more likely to benefit from the reform’s opportunities and mitigate its risks. Those that wait until new laws are enforced face a greater chance of penalties or financial setbacks. Like any major change, Brazil’s tax reform will reward those who plan ahead and seek the right guidance.

Conclusion

 

Brazil’s tax reform marks a significant step toward simplification and modernization. While it introduces some additional costs such as dividend taxation it has the potential to make the business environment healthier and more competitive in the long run. Foreign investors in the import and export sectors should view these changes as part of Brazil’s economic evolution, gradually adapting and seizing the new opportunities for tax efficiency. By eliminating multiple cascading taxes and standardizing the system, Brazil signals its intention to welcome foreign capital with clearer rules and greater fiscal fairness in market competition.

Naturally, a successful transition to the new system requires solid preparation. Roberta, Eduardo, Camila, and Leonardo each in their role will need to update their knowledge, rethink their strategies, and perhaps revise some internal practices. But they don’t have to do it alone. Having experienced local partners in the Brazilian market can make all the difference.

CLM Controller, for example, specializes in supporting foreign companies operating in Brazil. We offer tailored services such as accounting outsourcing, tax consultancy, and BPO solutions. With deep expertise in both the current system and the new tax framework, CLM acts as an extension of your company’s finance and accounting department ensuring full compliance with Brazilian regulations and identifying legal tax-saving opportunities. Whether your company needs to restructure its indirect tax accounting, recalculate transfer pricing, or simply keep your books up to date under Brazilian standards, a partner like CLM delivers peace of mind and operational efficiency. In times of change, this support is even more valuable: while CLM handles compliance and tax optimization, foreign investors can stay focused on business growth in Brazil confident they are navigating the reform safely and effectively.

In summary, Brazil’s tax reform directly impacts foreign investors but with the right information, planning, and expert support, the changes become less of a maze and more of a pathway to new opportunities. The post-reform Brazil is expected to become a more open and straightforward place to do business. Being prepared for this new chapter is the key to thriving in it, and partners like CLM Controller are ready to guide foreign companies toward compliant, tax-optimized, and successful operations in Brazil.